FT: Republican deal clears IMF debt relief plan (fwd)

[Robert Weissman <rob@essential.org>]

Financial Times (London) 
November 17, 1999, Wednesday London Edition 1 

Republican deal clears IMF debt relief plan 

By DEBORAH MCGREGOR 

WASHINGTON -- The International Monetary Fund will be allowed to use some
of its
gold reserves for international debt relief under an agreement reached
between the Clinton administration and Republican leaders. 

The issue had become entangled in the annual budget negotiations and its
resolution helped clear the way for a final budget deal, which appears
imminent between the White House and Congress. 

Under the plan, the IMF will be allowed to revalue a portion of its gold
reserves to create a Dollars 3.1bn interest-bearing fund. Under a complex
accounting formula, about 64 per cent of the interest from the account - an
estimated Dollars 118m a year - could be used for debt relief for poor
countries. Use of the rest would be subject to congressional approval next
year. 

Currently, the IMF has more than 100m ounces of gold on its books, valued
at about Dollars 47 an ounce. IMF officials had originally hoped to sell some
of the gold to finance their portion of a Dollars 27bn debt-forgiveness plan
agreed by President Bill Clinton and other wealthy nations at the G7 summit
in Cologne, Germany, last June. But fierce opposition from Republicans, who
take a dim view of anything involving more money for the IMF, helped sink
the idea. 

In addition, gold-producing countries objected that such a sale would drive
down the precious metal's price. In the end, the revaluing of the gold - which
would allow the IMF to reflect a market price of close to Dollars 300 an
ounce - was a compromise all parties could live with. 

Administration officials were pleased because it would allow the debt relief
initiative to proceed, marking a solid foreign policy victory for Mr Clinton. 

IMF officials were pleased that they would also be allowed to tap a special
Dollars 300m contingency account created in 1991 in case countries
defaulted on their loans. 

But Republicans bargained hard and they, too, claimed victory. Phil Gramm,
the Texas Republican who negotiated on behalf of the Senate, declared the
deal "a major victory", and said Republicans had secured a commitment that
the debt relief would be steered toward opening markets and stimulating
economic growth rather than supporting social programmes, as the
administration had preferred. 

An aide to Dick Armey, the Republican House leader who has been an
outspoken critic of IMF policy, said Mr Armey had pressed for, and won,
language ensuring that the money be used only for debt relief. 

Resolution of the IMF gold dispute came as international debt relief has
received attention from some unlikely sources in recent weeks. Rock singer
Bono of the Irish group U2 recently showed up on Capitol Hill, urging
congressional leaders, including Mr Armey, to embrace debt relief. 

The new movement has evidently won some converts in the US, despite
budget constraints and a traditional lack of political support for foreign aid
programmes.